so what appears to be happening is that the taxable portion of the 1099Q appears to be a function of (a) the qualified expenses amount you wish to base the American Oportunity credit calculation on, and (b) the earnings portion report on the 1099Q for the 529. in the interview for the 1098T, it tells you the amount of qualified education expenses and asks how much of that amount you wish to use in the calculation of the American Opportunity Credit. If i put in 0, i get no credit, and if i put in $4000, i get the maximum credit amount. And at $0 credit almost all of the 529 distribution is non-taxable, but if i claim $4000 in credit i pay more tax on the 529 earnings. I did find something in the instructions for form 8863 that says you have to reduce your qualified expenses by any tax free amounts such as tax free scholarships. TT, however, is not preventing me from using $4000 of expenses to calculate the opportunity credit. (I even tried playing around with the 1099Q numbers to see if i could get TT to prevent me from using all $4000 for the credit - i couldn't.) So, do i assume TT is correct in allowing me to select to use $4000? or is TT depending on me to figure out that i'm not allowed to do that. i can't determine the answer from reading the pubs - none of the examples are close enough to my situation. It'd be much simpler if TT would just connect the 1099Q and 1098T interview sections and just automate this. but would appreciate hearing what the right answer is here. thanks.
